Hardest Hit Housing Metros

The strong growth we’re seeing in Oregon’s two hardest hit housing metros of Bend and Medford — which were also among the worst in the U.S. — got me thinking about the rest of the country’s hardest hit areas. This is particularly interesting given the continued strong improvements in residential investment in the latest GDP data released today. Based on previous work where I examined the FHFA home price indexes for all 384 MSAs, I pulled out the 50 worst in terms of price declines. Due to data availability from BLS, I ended up using the 59 worst price decline MSAs to get 50 employment series, which are listed below by state. These are the worst of the worst in terms of the bubble bursting. Some might argue about the inclusion or exclusion of a couple of the metros based upon other metrics, however as a group, these are certainly representative. (E.g. Jed Kolko over at Trulia has his “clobbered metros” list for similar comparisons)

What does job growth in these metros look like? As expected they fell much further in recession than the average, however so far in expansion they are leading in terms of growth. Note that the QCEW data is only available through March, however given the local level CES estimate issues, this is by far the best data we have. Additionally Q2 data won’t be available for another month and a half.

As discussed the other day, much of this growth is due to the return of housing-related industries and relative improvements in the public sector — the two major economic drags early in the recovery. While I’m not able to pull down the full housing-related data for all areas, I did grab construction employment and the pattern is clear.

In terms of the individual metros, their relative return to peak for private sector employment can be seen below. They are indexed to March 2007 when their cumulative employment peaked. A few of the California MSAs have performed the best in terms of employment over the cycle, while the Nevada MSAs round out the worst performing.

Now, in terms of the CES estimates, these indicate that the hardest hit housing metros are performing right along with the U.S. average so far in recovery. This data is total nonfarm, whereas the work above concentrated on private sector, so that is part of the difference. However, given the experiences here in Oregon, I suspect that once the next round of local level revisions are taken into account, the red line will be above the blue line, just as it is in the QCEW data.

Overall this is great news for the economy as even the hardest hit areas are recovering with only a few not showing sustained improvements. In Oregon, these improvements in the worst housing metros have been enough to raise the state’s overall employemnt growth rate, however we’re not seeing that nationally or at least not yet. I think as the housing recovery continues and we’re just now beginning to reach the point where the level of construction activity should result in more construction jobs, we can see stronger employment growth overall. Of course this is all predicated on higher interest rates not choking off the housing recovery and the economy not falling back into recession in the near future either.

Responses

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